Earlier this month I wrote about the 2010 suspension of the federal estate tax. Now I would like to discuss the estate tax that is still alive and well in Ohio. Only 18 states including the District of Columbia have an estate tax that is still collected. For those of us who live in Ohio, the threshold of the gross taxable estate is $338,333, which is the lowest in the United States! Ohio’s estate rate starts at 6 percent and increases to 7 percent when the taxable estate exceeds $500,000.
It is important to note that all assets, probate and non-probate, are subject to Ohio estate tax. Probate assets are assets that are appraised, inventoried, and submitted to the court for review before distribution to the heirs after payment of debts, taxes, and expenses. Non-probate assets pass directly from the decedent to the beneficiary automatically at death. Examples of non-probate assets are assets included in “living trusts,” assets transferred or payable upon death, and property held jointly with right of survivorship.
Because Ohio is only one of four states in which over 50 percent of its land is classified as “prime farmland,” agriculture is very important to the state. One of the most beneficial elections for Ohio farmers is the Qualified Farm Property Valuation election. This election determines the taxable value of the farm property based on the current agricultural use valuation (CAUV) from the county auditor’s real estate property records as an alternative to fair market value. This discounted value can greatly reduce Ohio estate tax.
Ohio also allows an estate tax deduction for qualified family-owned businesses that piggybacks on Internal Revenue Service Code section 2057. Every definition and term used for the federal estate tax Qualified Family-Owned Business Interest deduction applies to the Ohio estate tax return even if a federal return is not required to be filed.
Ohio also offers several more elections to reduce Ohio estate tax such as a marital deduction, an alternative valuation date, and qualified terminable interest property election. These elections correspond to what was in place federally prior to 2010.
